STOCKS OFF TO A BAD START -- CHIPS ARE WEAKEST GROUP, GOLDS ARE BOUNCING
DOW SLIPPING UNDER 8000... The U.S. stock market is following big losses in overseas markets with some big losses of its own. The Dow is currently trading under its 50-day average -- and the 8,000 level. This puts the Dow below its mid-February breakout point near 8100. Needless to say, a close below 8,000 would weaken the short-term trend. Last week, we showed the daily stochastic lines turning down from from overbought territory over 80. The daily MACD lines are now also in danger of crossing into negative alignment. Global markets suffered losses of 3% in Asia and 4% in Europe. The Hong Kong market has fallen to a new 52-week low. Semiconductors are being sold heavily.
Chart 1
SOX FALLING 4%... The Semiconductor (SOX) Index is the hardest hit part of the U.S. market today -- already losing 4% in morning trading. The daily chart shows the SOX falling decisively below its 200-day moving average -- and heading for a test of its 50-day line. The daily stochastic lines have been negative for a week. The daily MACD lines are just now turning down.
Chart 2
BOND YIELDS ARE FALLING... With stocks on the defensive, it's not surprising to see bond yields falling as well since they've been trending in the same direction (meaning that bond prices rise when stock prices fall). The yield on the 10-year T-note is falling under its 50-day line today. The Dollar Index is also under pressure and is falling under its 50-day line. That's giving a boost to gold and gold stocks.
Chart 3
GOLD AND GOLD STOCKS ARE BOUNCING... We recently showed gold prices having reached crucial long-term support near $325. Gold's rebound off that support level continues today. June gold is up $3.80 to $336. With stocks and the dollar down today, gold stocks are up about 2% along with gold. The next two charts show the two gold indexes we now follow -- the XAU and the AMEX Gold Bugs Index. Both are bouncing from oversold conditions from potential chart support along their November lows. The daily stochastic and MACD lines are positive. Both indexes, however, are still beneath moving average lines. Gold stocks are the only winners so far today.
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